February 2011 Producer Price Index

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The Producer Price Index for finished goods increased 1.6 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.8 percent in January and 0.9 percent in December, and marks the largest increase in finished goods prices since a 1.9-percent advance in June 2009. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 2.0 percent, and the crude goods index climbed 3.4 percent. On an unadjusted basis, prices for finished goods advanced 5.6 percent for the 12 months ended February 2011, the largest 12-month increase since a 5.9-percent rise in March 2010. (See table A.)

Stage-of-Processing Analysis

Finished goods

Leading the broad-based increase in the index for finished goods, prices for finished energy goods and finished consumer foods moved up 3.3 percent and 3.9 percent, respectively. The index for finished goods less foods and energy also contributed to this advance, rising 0.2 percent.

Finished energy: Prices for finished energy goods climbed 3.3 percent in February, the fifth straight monthly increase. Accounting for over forty percent of the February advance, prices for gasoline rose 3.7 percent. Also contributing to higher prices for finished energy goods were increases in the indexes for home heating oil and residential electric power. (See table 2.)

Finished foods: The index for finished consumer foods surged 3.9 percent in February, the largest increase since a 4.2-percent climb in November 1974. About seventy percent of the February rise can be traced to higher prices for fresh and dry vegetables, which jumped 48.7 percent. Advances in the indexes for meats and dairy products also were major factors in the increase in the finished consumer foods index.

Finished core: In February, prices for finished goods less foods and energy moved up 0.2 percent, the third consecutive rise. Accounting for about twenty percent of the February increase was the index for passenger cars, which advanced 0.6 percent.

Intermediate goods

The Producer Price Index for intermediate materials, supplies, and components advanced 2.0 percent in February, the largest increase since a 2.7-percent rise in July 2008. About half of the broad-based February advance can be attributed to prices for intermediate energy goods, which climbed 4.3 percent. The indexes for intermediate goods other than foods and energy and for intermediate foods and feeds also contributed to this increase, moving up 1.1 percent and 2.6 percent, respectively. For the 12 months ended February 2011, prices for intermediate goods climbed 7.8 percent, the largest advance since rising 8.3 percent in May 2010. (See table B.)

Intermediate energy: The intermediate energy goods index advanced 4.3 percent in February, the largest increase since a 6.3-percent jump in January 2010. Over thirty percent of the February monthly rise can be traced to prices for diesel fuel, which moved up 12.6 percent. Higher prices for gasoline and jet fuel also were major factors in the February advance in the intermediate energy goods index. (See table 2.)

Intermediate core: Prices for intermediate goods less foods and energy climbed 1.1 percent in February, the seventh straight advance. Accounting for thirty percent of the February rise, prices for basic organic chemicals increased 4.5 percent. The iron and steel index also moved up, contributing to the advance in intermediate core prices.

Intermediate foods: The intermediate foods and feeds index rose 2.6 percent in February, the largest advance since a 4.1-percent increase in July 2008. A 4.1-percent jump in prices for dairy products accounted for nearly a quarter of the February advance in the intermediate foods index.

Crude goods

The Producer Price Index for crude materials for further processing rose 3.4 percent in February. For the 3 months ended in February, prices for crude materials climbed 13.8 percent, subsequent to a 6.7-percent increase for the 3 months ended November 2010. Over three-fourths of the February over-the-month advance is attributable to the index for crude foodstuffs and feedstuffs, which jumped 6.7 percent. Also contributing to the rise in prices for crude goods, the indexes for crude nonfood materials less energy and crude energy materials moved up 2.3 percent and 0.9 percent, respectively. (See table B.)

Crude foods: The index for crude foodstuffs and feedstuffs increased 6.7 percent in February. From November to February, prices for crude foodstuffs and feedstuffs surged 12.1 percent, compared with an 8.9-percent rise from August to November. Nearly thirty percent of the February monthly advance can be traced to a 9.8-percent jump in the grains index. Higher prices for fluid milk and slaughter livestock also were major contributors to the increase in the index for crude foodstuffs and feedstuffs. (See table 2.)

Crude core: The index for crude nonfood materials less energy moved up 2.3 percent in February. For the 3 months ended in February, crude core prices rose 10.1 percent following a 9.8-percent advance for the 3 months ended November 2010. A major contributor to the February over-the-month increase was the index for nonferrous metal ores, which climbed 4.4 percent. Higher prices for grains also were a significant factor in the rise in the crude core index.

Crude energy: The index for crude energy materials advanced 0.9 percent in February. From November to February, prices for crude energy materials increased 17.8 percent after rising 2.1 percent from August to November. In February, a 7.6-percent jump in the natural gas index led the monthly rise in prices for crude energy materials.

Services Analysis

Trade industries: The Producer Price Index for the net output of total trade industries moved up 1.5 percent in February, the first increase since October 2010. (Trade indexes measure changes in margins received by wholesalers and retailers.) A quarter of the February rise can be traced to a 12.0-percent advance in margins received by pharmacies and drug stores. Higher margins received by family clothing stores and merchant wholesalers of nondurable goods also contributed significantly to the increase in the total trade industries index.

Transportation and warehousing industries: The Producer Price Index for the net output of transportation and warehousing industries rose 0.5 percent in February, the fifth consecutive increase. Over one-third of the February gain can be attributed to a 2.1-percent advance in prices received by line-haul railroads. Increases in the indexes for couriers and general freight trucking also were factors in the rise in the transportation and warehousing industries index.

Traditional service industries: The Producer Price Index for the net output of total traditional service industries moved down 0.2 percent in February, subsequent to a 0.7-percent advance a month earlier. Leading the February decline, prices received by the commercial banking industry fell 4.8 percent. Lower prices received by general medical and surgical hospitals and by wired telecommunications carriers also contributed to the February decrease in the total traditional service industries index.